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Amazon May Split HQ2: One in Virginia, One Maybe in New York

Amazon’s search for a second headquarters, far from Seattle, took a surprise twist over the weekend: That second HQ might actually be two headquarters, not one. One would most likely be in Crystal City section of Arlington, VA (main photo), just across the Potomac River from Washington. The other site is less certain, but new reports suggest New York City and Dallas are leading contenders, New York more so than the Big D.

Amazon said it wants an area with a technically savvy workforce, good mass transportation of all kinds (bus, rail, commuter rail, air), educational institutions nearby, and reasonably priced housing for workers at all levels. Neither New York or metro DC are not known for cheap housing, but you can’t have everything.

Fewer Disruptions With a Pair of Smaller HQ2s

Amazon has been talking publicly about a second headquarters for a year. It narrowed the field from 238 dreamers such as Frisco (Texas, not San Francisco) to 20 contenders (below) in January. Now Amazon appears to be backing away from Plan A, putting 50,000 people in one location, even over two decades. So it’s looking at two cities with 25,000 people each — and also making two cities and states happy, not just one.

According to The Wall Street Journal, which has been the leader in breaking this round of news:

By building two headquarters, Amazon can tap different geographic regions for talent, including some who may not want to move too far from home. It may also not be competing with other major tech giants in a given area, like it does with Microsoft Corp. in the Seattle area. Additionally, the decision would allow it to lessen the potential headaches for chosen areas. Amazon has wanted to avoid being the only large company in town, something it has dealt with in Seattle [what’s Microsoft, then? – Ed.] …  Adding 50,000 workers—even over more than a decade—would likely cause some hiccups for transit systems and potentially lead to issues like a lack of affordable housing.

Northern Virginia’s Crystal City, a neighborhood in Arlington County, appears to be a front-runner to take one of the two final positions, according to people familiar with the matter. … Crystal City, just across the Potomac River from Washington, D.C., has an urban feel, numerous government offices and a ready-to-go campus with empty, older office space that Amazon could use. The area has good access to tech talent and transportation, two factors that rank high on Amazon’s wish list.

To that, I’d add, much of Crystal City feels gentrified, with lots of coffee shops, boutiques, and nightspots. If parts are aging, it’s not way run down. And there is a lot of available building space, much in the hands of a single developer.

Additionally, the fast-growing (even by Amazon standards) Amazon Web Services has a significant presence in the Washington area. Were Amazon to grow so big it needed to break up or be broken up — anti-trust and all — that could be the AWS headquarters.

The other reason for Amazon to have an operation in the Washington area is to keep an eye on the government, now that the government is watching Amazon: a) Amazon is the world’s second-biggest company after Apple (stock market valuation, or market cap, and b) and the Trump administration, starting from the top, has taken a disliking to Amazon. It is Amazon CEO Jeff Bezos who bought The Washington Post, not Tim Cook. A generation ago, tech companies thought they could do their thing and the government would be good to them. Now they know, as defense contractors, Hollywood, and big pharma know, that whispering in the ears of Congressmen and White House aides pays off.

Amazon HQ in New York’s Long Island City would look out on the new Cornell Tech campus in the East River with Manhattan in the background. (Photo: Cornell Tech. Main photo: Bill Howard)

New York vs. Dallas: Who Has the Edge?

Dallas seems less likely now, but it’s the cost leader among the three finalists. Doing business costs less in Texas and Dallas. There are all manner of incentives (the kind you don’t get moving a hair salon from Seattle) in the form of tax abatements, various grants, and cost sharing for infrastructure (buildings, access roads, and mass transit stops). Texas also doesn’t have personal income taxes. The former Dallas Morning News building has been offered up as a starter site: 7 acres near Amtrak, light rail, I-30, and I-35.

The possible New York City site, Long Island City (photo above), is the western edge of the borough of Queens (Queens is technically part of Long Island). It’s just across the East River from Manhattan; between the two lies Roosevelt Island, where Cornell University and Israel’s Technion (their MIT, Stanford and Cal Tech rolled into one) are building a billion-dollar tech campus. As for education, New York City, as former Mayor Michael Bloomberg said, has more students than Boston has — Bloomberg pauses for dramatic effect — people. Just to the south of LIC is NYC’s hippest borough, Brooklyn, although not exactly a low-cost living area. But you can rub elbows with Matt Damon and Norah Jones.

If personal politics enter into the equation, Blue State New York (and certainly bluer NYC) may have an advantage over Texas and the Big D. Texas is less friendly on gender issues. But demographics will probably flip Texas blue during the build-out phase. And every corporation loves the word “affordable.”

The New York Times reported Monday night that Long Island City was the likely second site, not Dallas, “according to people familiar with the decision-making process.” Two of Amazon’s largest non-Seattle outposts are in New York City (2,000 in publishing, advertising, and fashion) and 2,500 in D.C. and Northern Virginia (corporate, tech employees).

The Long Island City site most resembles Seattle politically, that is solidly Democratic. Seattle votes 33 percentage points more Democratic than the nation as a whole, Long Island City 31 points more Democratic, and Crystal City 21 points more Democratic. Dallas is more mainstream and votes 5 points more Republican than the US as a whole based on the 2016 and 2012 presidential elections, according to the Cook Partisan Voting Index. (The nation, as a whole, votes 51-49 Democratic.)

How the Top 20 Became 3 Finalists

Amazon’s Top 20 list of finalists were named in January. It included metro D.C. with three separate locations (Washington; Montgomery County, Maryland; and Northern Virginia now known to be Crystal City) and New York with two (Newark, NJ, a 20-minute train ride from Manhattan, and Long Island City, just across the East River from Manhattan). The 20:

Atlanta
Austin
Boston
Chicago
Columbus (Ohio)
Dallas
Denver
Indianapolis
Los Angeles
Miami
Montgomery County (Maryland)
Nashville
Newark (New Jersey)
New York City
Northern Virginia
Philadelphia
Pittsburgh
Raleigh (North Carolina)
Toronto, Ontario, Canada
Washington D.C.

One of the most intriguing of the 20 was Toronto. It is North America’s fourth largest city (after Mexico City, NYC, and LA). The metro area population tops 6 million, and fits the transportation/education/tech workforce criteria, plus one informal criterion (hip place to live), and it’s just outside the U.S. Being in Canada means healthcare is assured (by the government) and, should Jeff Bezos want to go to the mattresses, Toronto is a big up-yours to the Trump administration. Where Microsoft’s Steve Ballmer and Paul Allen bought sports teams to play with, Bezos bought the WaPost as mentioned above, and it has been the biggest thorn in the President’s side other than The New York Times. 

Most West Coast cities were out because they were too close to Seattle; only LA survived to the round of 20.

Denver was considered one of the likely final finalists when the 20 were announced and is the most surprising city not to be in the reported round of three. It may be that Denver ranked high on all attributes, but other than perhaps cost-of-living was a winner in none. New York and DC dwarf Denver in terms of universities and tech workers nearby. Gov. John Hickenlooper told Colorado Public Radio two weeks ago, “I know there were issues around, are we too close to Seattle? Wouldn’t they rather have their second big hub on the East Coast?”

Of the two finalist metro-NYC sites, Newark was the long shot. It has developed a commercial corridor stretching from Newark Penn Station (commuter rail, light rail, subway, Amtrak), Panasonic’s new US HQ, and Prudential Insurance, to the Prudential Center arena, Amazon subsidiary Audible, and a four-college district with 40,000 students. Newark Airport, a 10-minute train and monorail ride away, beats overcrowded LaGuardia hands down. But Newark is still rough in many ways, and if Amazon gentrified the city, there would be the optics of minorities being pushed out, where Long Island City would simply displace lower and middle-income people of all stripes.

Now read: Android Malware Found Mining Cryptocurrency on Amazon Fire TVs, Amazon Wants to Deliver Packages to the Trunk of Your Car, and Amazon May Announce a Domestic Robot This Year

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